Correlation Between Addus HomeCare and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both Addus HomeCare and UMC Electronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Addus HomeCare and UMC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Addus HomeCare and UMC Electronics Co, you can compare the effects of market volatilities on Addus HomeCare and UMC Electronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Addus HomeCare with a short position of UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Addus HomeCare and UMC Electronics.
Diversification Opportunities for Addus HomeCare and UMC Electronics
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Addus and UMC is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Addus HomeCare and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and Addus HomeCare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Addus HomeCare are associated (or correlated) with UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of Addus HomeCare i.e., Addus HomeCare and UMC Electronics go up and down completely randomly.
Pair Corralation between Addus HomeCare and UMC Electronics
Assuming the 90 days horizon Addus HomeCare is expected to under-perform the UMC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Addus HomeCare is 1.78 times less risky than UMC Electronics. The stock trades about -0.42 of its potential returns per unit of risk. The UMC Electronics Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 183.00 in UMC Electronics Co on November 28, 2024 and sell it today you would earn a total of 8.00 from holding UMC Electronics Co or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Addus HomeCare vs. UMC Electronics Co
Performance |
| Timeline |
| Addus HomeCare |
| UMC Electronics |
Addus HomeCare and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Addus HomeCare and UMC Electronics
The main advantage of trading using opposite Addus HomeCare and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Addus HomeCare position performs unexpectedly, UMC Electronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UMC Electronics will offset losses from the drop in UMC Electronics' long position.| Addus HomeCare vs. VITEC SOFTWARE GROUP | Addus HomeCare vs. Sqs Software Quality | Addus HomeCare vs. CyberArk Software | Addus HomeCare vs. AXWAY SOFTWARE EO |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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